Cdc48p/p97 is a highly conserved essential AAA protein that is required for many cellular processes, and is identified as a causative gene for an autosomal dominant human disorder, inclusion body myopathy associated with Paget's disease of the bone and frontotemporal dementia (IBMPFD). Cdc48p/p97 is composed of an N-terminal domain, followed by two AAA domains (D1 and D2) whose ATPase activities have been characterized extensively. In this study, effects of mutations on the essential functions of yeast Cdc48p/p97 in vivo were systematically analyzed. IBMPFD-related mutations do not affect the essential functions of Cdc48p/p97. Loss of ATPase activity of D2 leads to loss of function of the protein in vivo. In contrast, ATPase activity of D1 per se is not essential, but a mutation locking D1 in an ATP-bound form is exceptionally lethal. Site-directed and random mutagenesis analyses suggest that the ATP-bound form of D1 changes an inter-domain interaction, thereby perturbing an essential function of Cdc48p/p97.